Funny or Die: Groupon’s Fate Hinges on Words

Sunday

May 29, 2011 at 5:09 AM

The e-mail marketer hopes that its staff of 400 writers and editors will keep it one step ahead of its discounting competitors on the Web.

DAVID STREITFELD

RACHEL HANDLER is struggling to say something funny or perhaps amusing or at least clever about horses. Her mind is empty. She can’t recall the last time she was on a horse or even saw a horse. The minutes fly by. Horses are nothing to joke about.

Ms. Handler writes for Groupon, the e-mail marketer that was casually founded in the pit of the recession and almost immediately became a sensation worth billions. The musicians, poets, actors and comedians who fill its ranks are in a state of happy disbelief over the company’s success. In the age-old tradition of creative folk, they were just looking for a gig to support their art. Now stock options have made some of them seriously wealthy, at least on paper.

Poets who work here give away copies of their verse in the reception area. One poem begins like this:

closed my eyes and I was nothing

yeah, I was running

I was nothing

and then I was flying

That just about sums up Groupon’s brief history, which has been meteoric even by dot-com standards. Groupon, which is expected to go public within the next year, is either creating a new approach to commerce that will change the way we eat and shop and interact with the physical world, or it is a sure sign that Internet mania is once again skidding out of control. Or both.

The big Internet companies owe their dominance to something singular that shut out potential competitors. Google had secret algorithms that gave superior search results. Facebook provided a way to broadcast regular updates to friends and acquaintances that grew ever more compelling as more people signed up, which naturally caused more people to sign up. Twitter introduced a new tool to let people promote themselves.

Groupon has nothing so special. It offers discounts on products and services, something that Internet start-up companies have tried to develop as a business model many times before, with minimal success. Groupon’s breakthrough sprang not just from the deals but from an ingredient that was both unlikely and ephemeral: words.

Words are not much valued on the Internet, perhaps because it features so many of them. Newspapers and magazines might have gained vast new audiences online but still can’t recoup the costs from their Web operations of producing the material.

Groupon borrowed some tools and terms from journalism, softened the traditional heavy hand of advertising, added some banter and attitude and married the result to a discounted deal. It has managed, at least for the moment, to make words pay.

IN 177 North American cities and neighborhoods, 31 million people see one of the hundreds of daily deals that Ms. Handler and her colleagues write, and so many of them take the horseback ride or splurge on the spa or have dinner at the restaurant or sign up for the kayak tour that Groupon is raking in more than a billion dollars a year from these featured businesses and is already profitable.

There used to be a name for marketing things to clumps of people by blasting messages at them: spam. People despised it so much it nearly killed e-mail. The great achievement of Groupon — a blend of “group” and “coupon” — is to have reformulated spam into something benign, even ingratiating.

Ms. Handler is working on an offer for Pine River Stables in St. Clair, Mich., a place she has never been to. It is the stables’ first deal on Groupon: $18 for a one-hour ride for two people, half the regular price.

It takes Ms. Handler about 50 minutes to assemble the write-up, which is a few straightforward paragraphs explaining the details with the occasional gag as sweetener (The stables are closed “on Wednesdays, in the event of bad weather and on Horse Christmas.”) She puts off writing the first sentences, the ones that are supposed to seduce every Groupon subscriber in Detroit — either to go horseback riding or at least keep reading Groupon’s e-mails.

Still stumped, she browses an online thesaurus. She studies the Pine River Web site for the umpteenth time. She wishes she lived in a world without horses.

Her fingers flick on the keyboard. “Without horses,” she writes, “Polo shirts would be branded with monkeys and Paul Revere would have been forced to ride on a Segway. Celebrate our hoofed counterparts with today’s Groupon. ...”

Good enough. She moves the copy along to the fact-checking department.

Like many others at Groupon, the 23-year-old Ms. Handler comes from an arts background. At the University of Michigan, she studied English and global media studies, wrote TV reviews for the student paper and short stories for fun.

Groupon shuns being thought of as a marketer or, worse, an ad agency, promoting cheap pizza or sushi for anyone who wants to hire it. The hope instead is that its users will eventually perceive it as an impartial guide to a city or a neighborhood, somewhat in the manner of the local paper’s weekend section. With more than 400 writers and editors, Groupon’s domestic editorial staff is on the verge of eclipsing the big name across the Chicago River, The Chicago Tribune.

Groupon just introduced a smartphone application for Chicago users called Groupon Now, which offers deals near where the person happens to be. The application has two buttons, one if you’re hungry, the other if you’re bored. Any publication, Web site or marketer that can control where people go when they ask themselves these questions on a dull Saturday night has a shot at dominance.

Aaron With is Groupon’s editor in chief. The 29-year-old Mr. With has no journalism or marketing background: he worked for a Chicago nonprofit and, more relevantly, was once in a band with Andrew Mason, Groupon’s chief executive.

“People have grown numb to the elements of advertising that pander to their fears and hopes, that insult their intelligence with safe, bland approaches at creativity,” says Mr. With, who at nights and on weekends is lead singer in the band Volcano. “We’re mixing business with art and creating our own voice.”

The Voice. This, Groupon says, is what subscribers respond to as much as the deal itself. “Thirty percent of our subscriber base makes over $100,000 a year,” says Mr. With. “They don’t need $20 off at a restaurant.”

Any Web site can offer a daily deal, and in the wake of Groupon’s success just about everyone is. There are hundreds of knock-offs and imitators, some of them trying to undercut the original by charging the merchant less than Groupon does. Others try to cater to specialized audiences (babies, gay people). Groupon’s closest competitor, Living Social, is backed by Amazon, the retailing giant that has a history of winning.

“We’re not at all concerned any competitor is going to come in and start writing like us,” says Mr. With. “They try but fall flat.” (Living Social declined to comment.) In other words, words will save Groupon. Many more words. Mere words.

CHICAGO has revolutionized retailing before. In 1872, a dry-goods salesman named Aaron Montgomery Ward wearied of visiting far-flung stores, so he mailed descriptions of goods directly to rural residents. The orders were sent by a new delivery system that wreaked havoc on traditional commerce: the railroad.

Ward’s innovation was as much of a cultural achievement as a merchandising one — farmers read his catalogues for pleasure, dreaming of a better world. They were the foundation of a retail empire that lasted more than a century until the management failed one time too often to anticipate a shift in consumer tastes. Ward’s went bust a decade ago.

Groupon’s corporate headquarters are in the old Montgomery Ward building, which should be reminder enough of the dangers of neglecting the customer’s desires. But Mr. Mason, the chief executive, sought to underline the point by putting on the wall certain business magazine covers. They celebrate tech start-ups — the social network Friendster, the music site MySpace — at the moment they seemed poised for greatness, before they irrevocably stumbled.

Since December, the editorial team has been housed in a nearby skyscraper, where they have yet another reminder that marketing cannot trump reality forever. The previous tenant was an investment firm that vacated the premises in such a hurry that half-eaten sandwiches were still on desks when Groupon showed up. The abrupt departure was apparently precipitated by a Securities and Exchange Commission court order freezing the firm’s assets because of allegations of fraud.

The spoiled sandwiches are gone, but the investment firm’s giant logo remains in the Groupon reception area, stacks of its literature are stuffed in a corner, and the principles of life as enumerated by John D. Rockefeller in 1937 are still bolted to the conference room wall. The fraud accusations have given the saying about the law — “I believe that the law was made for man and not man for the law” — a whole new meaning.

Much of the Groupon suite lacks finished ceilings or other signs of permanence. The occupants of offices are indicated not by plaques but slips of paper taped to the wall. Few of the cubicles have personal touches. Everything is anonymous and just about everyone is under 30.

“A lot of professional writers apply here. I’ve had applicants from Rolling Stone, The Wall Street Journal,” said Keith Griffith, director of recruiting. “But it’s really hard to get them to do what we’re looking for. It’s easier to teach people than unteach them.”

In the mythology of Silicon Valley, tech companies hire only the geekiest engineers, weeding out the pretenders with questions that ordinary mortals could never fathom, like this: How many golf balls does it take to fill a 747?

Groupon is trying to reach a different skill set. Here is one of the questions it asks prospective hires:

Q. Which is the most interesting way to describe a 4,700-pound chandelier?

A. Blinged out

B. More brilliant than a studious Christmas tree

C. A death trap

D. Really big and shiny

Not enough people pass the test — the correct answer is B — or ace the sample write-up. “My constant fear is that we’re going to run out of writers in Chicago,” said Mr. Griffith, 27, who in his spare time is a theater critic for The Chicago Reader, an alternative paper.

Another reason the employment skews young is because the pay for new writers is less than extravagant — about $37,000 a year. This is a touchy subject with Groupon management, which says it is offering the going rate for workers in their early twenties. Also, promotions are plentiful, even for new hires like Ms. Handler, who joined Groupon in January and is now an editor.

“If we ran an irresponsibly high overhead, it could jeopardize our ability to stay ahead in an unprecedentedly crowded space,” says Mr. With, the editor in chief.

Some of the earliest employees in every department have equity, but the company declines to say what, if anything, new writers get. Given the tremendous valuations being tossed around for Groupon, there is the potential for deep divisions between the haves and have-nots.

About two new editorial workers are being hired every weekday. It is the job of Whitney Holmes, a poet with a fine arts degree from the University of Alabama, to teach them the Voice.

Ms. Holmes began at Groupon last August as a writer, then became an editor, then senior editor. At 27, she says she feels kind of old compared to everyone else. She taught creative writing in Alabama, but the traditional assertion in classrooms that writers are born and not made is here reversed.

“Inspiration is a bunch of hooey,” Ms. Holmes says. “You can teach someone how to put together things that are funny.”

Addressing a new crop of writers at a training session, she seeks first to reassure. “Achieving Groupon Voice is not about being inherently funny. If it were, 93 percent of our writers would not have jobs,” she says.

The writers, who have been on the job less than two weeks, laugh uneasily. Ms. Holmes takes them on a brisk tour of the history and theory of humor. Much humor, she notes, is based on superiority — laughing at the well-deserved misfortune of idiots. Groupon doesn’t do this. Incongruity, however, is fine. Shock is not funny, but surprise is useful.

She gives them a pop quiz: The kitchen is statistically the most dangerous room in a home because it contains the highest concentration of knives, open flames and ...

A. cereal killers

B. spoiled fruit

C. mother-in-laws

D. pots of semi-living lobsters

Nearly half the writers pick A, but the correct answer is D. Puns are not allowed, spoiled fruit isn’t even remotely funny, and defaming mothers-in-law could irk mothers-in-law.

Some other rules: The passive voice is to be avoided and pop culture references are verboten. A write-up for a teeth-whitening service said it was “equivalent to being punched by God twice.” Angry letters followed. The new edict is to substitute Zeus for God, Roman mythology being deemed suitably innocuous.

An example of a successful use of the Groupon Voice is long overdue. Here are two classics:

For a yoga and massage service:

“Today’s modern world, with its plethora of countries, panoply of waterways, and constantly changing laws about what is and what isn’t mail fraud, is as confusing as it is stressful. Get a clear definition of relaxation with today’s Groupon.”

For a dentist:

“The Tooth Fairy is a burglarizing fetishist specializing in black-market ivory trade, and she must be stopped. Today’s Groupon helps keep teeth in mouths and out of the hands of maniacal, winged phantasms.”

The writers in the class do exercises on hair salons and car washes. Excellence is rare. But they’ll get plenty of practice, doing as many as seven or eight write-ups a day.

“Every joke has a setup and a payoff,” Ms. Holmes says. “If the setup is confusing, the payoff will never land.”

Which is of course the primary threat to Groupon. It needs to expand while keeping subscribers engaged and those hair salons and car washes happy. Sometimes the payoff for the company offering the service disappears into the blur of words. Restaurants have been overwhelmed by too-successful Groupons where they are forced to sell many meals too cheaply. Some question whether any of these customers ever come back for a full-price meal.

At a forum on Groupon at the recent South by Southwest technology conference in Austin, a San Francisco entrepreneur called the Voice “incredibly powerful” but said the actual implementation of his company’s deal was fraught with missteps.

“All that great stuff you see on copywriting and marketing side, it’s completely disconnected from the operations side,” said Travis Kalanick, chief executive of Uber, a car hire service. “Maybe it’s because they’ve grown too fast.”

GROUPON was first noticed by people who do not use Groupon when Google tried to buy it in December for a reported $6 billion. It was an immense sum for a two-year-old company, but this was one deal that Groupon didn’t like.

Instead, it got the money — $950 million — to expand through another round of venture capital financing. The company celebrated with a self-mocking press release: “Groupon raises, like, a billion dollars.” It boasts that its editorial process is now eight stages long.

Remember the stable with the horse ride? After the initial write-up was complete, it went to Benno Nelson in fact-checking. Mr. Nelson, 25, has a passion for theater — he is an assistant director at an acting conservatory — but you have to eat, and this is much better than his previous day job of selling kosher pretzels to bars. “Groupon, like theater, is all about text and context,” he says.

Then it’s on to the Voice editor, Ben Kobold. In the tradition of editors everywhere, he glances at the copy, sighs and slumps down in his chair.

“Too much zaniness, no real logic,” said Mr. Kobold, 27, an alumnus of the Second City comedy troupe’s improvisation and writing programs. He keeps the first two words — “without horses” — as a springboard, and starts improvising.

“Without horses, salt licks would only dissolve during torrential downpours or the warm tongue of a weary traveler,” he writes, vividly if lacking a bit of grammar.

As with every deal, the stables write-up will be joined with a riff from one of the four Groupon humor writers. The more you can laugh with Groupon, the more you will like it. Or so the company hopes.

“With piano recital season coming up, faking one’s own death is becoming more and more popular,” was the beginning of one recent riff. Angry letters followed. Cullen Crawford, the writer, shakes his head. “Just because it had the word ‘death,’ ” he explains.

The humor writers share a corner office. Witty chitchat does not fill the air à la the Algonquin Roundtable. Mostly, they stare at their computers.

Again with the monkeys! Mr. Weiner is amused, not so much by what he is writing as the fact that he is getting paid to do it. Before Groupon, he worked in a dog kennel, where one day a dog died right in front of him. Mr. Weiner was worried the owner would be heartbroken or furious, but it turned out she had planned it to happen this way. She didn’t want the mess of the pooch expiring at home.

“My dream,” says Mr. Weiner, 26, “was to get a job writing comedy and make more than minimum wage watching dogs die.”

Groupon seems likely to fulfill the grander dreams of its investors and early employees by going public. The initial public offering this month of LinkedIn, which is basically a bulletin board for millions of professionals to list their résumés, did much better than anyone expected, doubling on the first day. LinkedIn’s profits are negligible by comparison, but its valuation is now $8 billion.

Doubtless Groupon will present its I.P.O. in sprightly Groupon style, probably something like this: “Sometimes it’s not enough simply to appreciate e-mails from clever people. Sometimes you want to own them too.” The offering could value the company at $25 billion, which would top Google’s 2004 debut as the richest ever for an Internet company.

Perhaps that sum will seem in hindsight to be a great deal, as was true with Google itself. Or maybe it will be Groupon’s best joke ever.